Friday, March 28, 2014

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONSSEC Obtains Order Enforcing Compliance with Order to Pay Over $5 Million in Disgorgement, Prejudgment Interest, and Civil Penalties, March 26, 2014, (Litigation Release No. 22952)

An opinion and order were entered this week "directing Walter Gerasimowicz, Meditron Asset Management, LLC, and Meditron Management Group, LLC to comply with the SEC order requiring them to pay $3,143,029.41 in disgorgement and prejudgment interest, and a civil penalty of $1,950,000." The SEC had previously found that the Respondents had "willfully violated the antifraud provisions" of the securities laws.

A summary judgment was entered against Jonathan Curshen which permanently enjoins him from future violations of the securities laws, imposes a penny stock bar against him, orders him to pay a $65,000 civil penalty, and holds him "jointly and severally liable with Defendant Bruce Grossman for $76,000 in disgorgement, plus $18,599.86 in prejudgment interest." In 2012, a final judgment was entered against Grossman that permanently enjoins him from future violations of the securities laws and imposes a penny stock bar against him. Grossman's liability "was deemed fully satisfied by Grossman's criminal forfeiture order in United States v. Grossman."

The SEC's original complaint found that the defendants "engaged in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Industrial Biotechnology Corp."

District Court Enters Final Judgments of Permanent Injunction Against All Defendants and Orders Penny Stock and Officer and Director Bars Against Linda Grable and Allan Schwartz, March 25, 2014, (Litigation Release No. 22950)

Final judgments were entered against Imaging Diagnostic Systems, Inc., Linda Grable, its CEO, and Allan Schwartz, its CFO, that permanently enjoin them from future violations of the securities laws, and impose penny stock bars and officer and director bars against Grable and Schwartz as well as order Grable and Schwartz to each pay $150,000 civil penalties.

The SEC's original complaint found that the defendants "made material misstatements and omissions in Imaging Diagnostic's public filings about the timing of the company's Food and Drug Administration application and its failure to remit payroll taxes to the Internal Revenue Service."

An emergency Order (PDF) has been issued that freezes and preserves "the remaining pool participant assets under the control of Michael James Seward, Yan Kaziyev, and their company SK Madison Commodities, LLC" and "freezes assets controlled by a successor company, SK Madison, LLC, prohibits Seward, Kaziyev, and SKMC from destroying books and records, and allows the CFTC immediate access to those records." The CTFC's original complaint (PDF) alleges that the defendants "fraudulently solicited more than $1.3 million from members of the public to trade futures in a commodity pool by...misrepresenting their trading practices and historical trading returns,...prepared and distributed...false account statements and performance reports showing huge profits" and "divert[ed] large amounts of pool participants’ funds for [their] own use." The CFTC seeks full restitution, disgorgement, civil penalties, permanent registration and trading bans, and a permanent injunction against the defendants.

Federal Court in North Carolina Orders Mitchell Brian Huffman to Pay $2.1 Million Penalty for Defrauding Customers of More than $3.2 Million in Commodity Pool Scheme, March 24, 2014, (CFTC Press Release No. 6891-14)

The CFTC obtained a federal court supplemental Consent Order (PDF) which requires Mitchell Brian Huffman "to pay a $2.1 million civil monetary penalty for operating a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts." A separate Order requires Huffman "to pay $3.2 million in restitution to defrauded customers" as a part of his criminal sentencing in United States v. Mitchell Brian Huffman. A Consent Order (PDF) was entered in 2012 that "imposes permanent trading and registration bans against Huffman, prohibits him from violating federal commodities law, as charged" as well as orders him to pay the civil penalty "as provided for in the supplemental Order."

Morgan Stanley has agreed to pay "a $200,000 civil monetary penalty to settle CFTC charges that it exceeded speculative position limits in soybean meal futures contracts trading on the Chicago Board of Trade ." The CTFC Order (PDF) against MSGCI also requires "MSGCI to cease and desist from further violations" of the federal commodities laws.

A judgment was entered against Patrick Cole and his company, Global Strategic Marketing, Inc., for allegedly committing "fraud in connection with a multi-million dollar off-exchange foreign currency Ponzi scheme." The court's Order (PDF) "imposes disgorgement of $1,146,399,...requires Cole and GSM to pay civil monetary penalties of $1,146,39,...imposes permanent trading and registration bans on Cole and GSM, and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged."

In May 2013, a judgment was entered "requiring Defendants CDL, its principals and controlling persons Kevin Harris, Keelan Harris, and Karen Starr, and Defendant Investment International Inc., to pay over $23 million in civil monetary penalties and restitution in connection with this fraudulent forex Ponzi scheme."

Disclaimer

This website and its content are for informational and educational purposes only. The views and opinions on this site are those of the authors and should not be considered investment advice. Decisions based on information obtained from this website are your sole responsibility, and before making any decision on the basis of this information, you should consider whether the information is appropriate in light of your particular investment needs, objectives and financial circumstances. Investors should seek financial advice regarding the suitability of investing in any securities or following any investment strategies.